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Mantega Says Rate Cuts to Stimulate Entire Brazilian Economy

Brazilian Finance Minister Guido Mantega said interest rate cuts by the central bank will in time serve to stimulate all of Brazil’s economy.

Mantega, speaking at an event in Sao Paulo last night, reiterated that a weaker Brazilian real will help stimulate competition. The currency declined 4.9 percent in November, the worst performance against the dollar among the 16-most traded currencies tracked by Bloomberg.

The finance minister said Nov. 30 that the government will continue to pursue stimulus measures, adding that manufacturers that benefit from a weaker real had yet to see the full effects of the currency’s plunge.

A report last week showed that growth in the world’s sixth-biggest economy expanded 0.9 percent in the third quarter from a year earlier, the worst performance among the so-called BRIC nations. On the quarter, gross domestic product grew 0.6 percent, half the pace forecast by economists surveyed by Bloomberg.

After the Nov. 30 report showed GDP missing forecasts, the real fell to a three-year low. In trading yesterday, the currency rebounded 0.6 percent to 2.1235 per dollar.

While GDP was not what the government was hoping for, the economy is accelerating and will expand by 1 percent in the fourth quarter, Mantega said Nov. 30. The government is maintaining its forecast for 4 percent growth next year, he said at a news conference in Sao Paulo.

Since last August, the central bank has lowered the Selic rate by 5.25 percentage points to a record low 7.25 percent.

Mantega last night said Brazilian economic growth is the means to transforming society and that Brazil is becoming a great middle class country.

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